2_______________________________________________________________________________________ Jessica King BSB119 – Global Business 07187696 LECTURE 6: TRADE AND INVESTMENT Political Risk •Political risk is the likelihood that the foreign investment of a business will be constrained by a host government's policies. •Adverse actions that affect the operating conditions of MNCs include war, insurrection or political violence oThey also include more subtle changes: in government attitudes and policies that affect the behaviour, ownership, physical assets, personnel or operations of the firm •Khambata and Ajami (1992, pp. 285-290) group the factors that affect political risk into two categories: inherent risk (constantly present around the world) and circumstantial risk (that arises out of particular events in different countries). You should make sure that you understand the factors considered in each of these categories. oInherent risk (constantly present around the world) oCircumstantial risk (that arises out of particular events in different countries).